Amazon bets big on FMCG discounts this year

Amazon’s Great Indian Festival sale runs from September 21-24, with Prime users getting access to it from September 20Ratna Bhushan&Writankar Mukherjee | ET Bureau | September 20, 2017, 08:55 IST

Amazon will step up heavy discounting on food and grocery this festive season as competition in the ecommerce grocery space intensifies, although consumer goods companies said they will not offer incremental discounts for any one sales channel.

Two executives directly aware of Amazon’s plans said the marketplace, armed with government approval to sell food directly to consumers, plans to offer discounts of up to 40% on food items. It will also offer up to 35% discount on makeup and beauty products, up to 70% on baby care products, and close to 50% on laundry and personal care products.

Amazon’s Great Indian Festival sale runs from September 21-24, with Prime users getting access to it from September 20. There will be more such sales through the festive season.

The marketplace will offer promotions on fast-moving consumer goods during the festive period to win over customers, said Saurabh Srivastava, Amazon India, director, category management (FMCG).

“During the upcoming festival sale, we are working with sellers to offer our customers great deals on great brands. Customers will be able to save on grocery, personal care and baby products,” he said.

He added that makeup, skin and hair care products were focus categories for festive sales since customers like to pamper themselves during this period. Similarly, there will be discounts on grocery and household essentials such as sugar, oil and flour that go into preparing sweets and savouries during the festive season.

“While Amazon has first-mover advantage in the FMCG space, it wants to create an impact during the festive sales in this category since consumers would buy grocery products weekly or fortnightly and hence there’s a bigger opportunity for customer recall,” said one of the people cited above. “The repeat purchase opportunity is more since a consumer will not buy a mobile phone or apparel as frequently as FMCG and hence it is asking sellers to forsake profit margins for the sale.”

Amazon has reduced the commission charged from sellers by more than half depending on the category, on the condition that savings are passed on in the form of additional discounts, said the people cited above.

It has asked sellers to keep their margins at the bare minimum to boost volume and build consumer loyalty.

An industry executive said most of the discounts and deals on FMCG products at Amazon will be from Cloudtail, a company jointly owned by Amazon and Catamaran Ventures, in addition to a few large sellers on the marketplace.

Producers said they won’t single out any seller for special treatment.

A spokesperson for Reckitt Benckiser said: “Amazon is our biggest online customer. However, we don’t differentiate between discounts and promotions between our online and offline customers. Also, we don’t play a role in determining pricing of individual sellers. It’s up to them if they want to make their consumer offers more attractive. The only legal requirement is they can’t sell above the MRP.”

Britannia MD Varun Berry said: “We will participate in online discounting to a limited extent, and only if it gives us a long-term advantage, not if it disrupts our existing distribution partnerships.” Consumer goods maker Dabur’s chief executive Sunil Duggal said: “We will maintain reasonable parity across general trade, modern trade and ecommerce. We don’t intend to do deep discounting to the level that it gets disruptive for any channel.